Mortgage Refinance Calculator

How a mortgage refinance changes your payment and total interest

A refinance pays off your current home loan and replaces it with a new loan. Under 12 CFR 1026.37(a)(9)(ii), the Loan Estimate marks a loan as a Refinance when it pays off an older loan on the same home. Your current payment comes from the balance you still owe, your current rate, and the months left on your schedule.

A lower rate does not always cut your total cost. Suppose you owe $250,000.00 at 7% with 300 months (25 years) left. Your payment is $1,766.95 (final payment $1,765.45) and your remaining interest is $280,083.50. A new 30-year (360-month) loan at 6% drops your payment to $1,498.88 (final payment $1,495.45), saving $268.07 a month. Yet it runs 60 months longer. Until both loans are paid off, its interest is $289,593.37, which is $9,509.87 more. With the $6,000.00 of closing costs, the refinance costs $15,509.87 more in total.

To save on both the monthly payment and total cost, match or shorten your remaining term. Refinancing that $250,000.00 balance into a 25-year (300-month) loan at 6% sets the payment at $1,610.75 (final payment $1,613.14). You save $156.20 a month and pay back the $6,000.00 of costs in 38.4 months. Total interest falls to $233,227.39, which saves $46,856.11, or $40,856.11 after the closing costs. Test extra payments on your current loan in the loan extra payment calculator. You can also check early payoff plans in the mortgage payoff calculator.

The refinance payment and break-even formulas

L_new = B_old + C_out + F_fin        r = annual rate ÷ 12
M = round_cents(P × r × (1 + r)^n ÷ ((1 + r)^n − 1))        (at r = 0, M = round_cents(P ÷ n))
S = M_old − M_new        F_upfront = F_total − F_fin        T_be = F_upfront ÷ S  (when S > 0)
Net = I_old − I_new − F_total  (until both loans are paid off; a cash-out is received once and repaid, so it nets out)
I_k = round_cents(B_{k−1} × r)        P_n = B_{n−1} + I_n        I_total = Σ I_k
LTV = L_new ÷ V_home        C_max = V_home × LTV_max − B_old − F_fin

Worked refinance examples

Example 1 — Shortening to a 15-year term at 5.5%. You owe $250,000.00 at 7% with 300 months (25 years) left. You refinance into a 15-year (180-month) loan at 5.5% with $5,000.00 in upfront closing costs. Because you pay the loan off in 180 months instead of 300, the monthly payment rises to $2,042.71 (final payment $2,042.22). That is $275.76 more a month (−$275.76 monthly change), so there is no monthly saving to pay back the costs. In exchange, total interest over 180 months drops to $117,687.31. You save $162,396.19 in interest, or $157,396.19 after the closing costs, and pay the home off 10 years sooner. Month by month, you are behind until month 211. After month 180 you make no payments, while your current loan's $1,766.95 would have kept coming. View the full payoff table in the loan amortization calculator or compare 15-year and 30-year loans in the mortgage term comparison calculator.

Example 2 — CFPB Form H-24(D) refinance sample ($150,000.00 loan on a $180,000.00 home). The CFPB's sample refinance Loan Estimate H-24(D) pays off a $120,000.00 balance with a new $150,000.00 30-year loan at 4.25%. The home is valued at $180,000.00. Total closing costs on page 2 are $5,099.00 ($3,521.00 in Loan Costs plus $2,078.00 in Other Costs minus a $500.00 Lender Credit). All $5,099.00 is rolled into the loan, and the remaining $24,901.00 goes to the borrower at closing. At 4.25% over 360 months, the new principal-and-interest payment is $737.91 a month (final payment $737.81) and total interest is $115,647.50. The form does not print the old loan. Suppose it was 6.5% with 240 months left, which makes the payment $894.69. The new payment is then $156.78 lower, and nothing is paid at closing. Over 360 months, though, interest and costs run $26,021.97 higher than on the old loan. Of the new loan's interest, $19,197.73 is on the $24,901.00 cash. At the 83.3% LTV ($150,000.00 ÷ $180,000.00), the form also lists $82.00 a month in mortgage insurance for years 1 to 4. The calculator's payment leaves that out.

Scope, rounding, and loan limits

• Principal and interest only: Payments cover principal and interest (P&I) on fixed-rate loans with monthly compounding (r = annual rate ÷ 12). The payments leave out property taxes, home insurance, HOA dues, and mortgage insurance. Taxes, insurance, and dues do not change when your note rate changes. Mortgage insurance can.
• Whole-cent monthly schedule: Each payment and each month's interest is rounded half-up to the cent. That is this calculator's own convention. Under comment 17(c)(3)-1 to 12 CFR 1026.17, creditors may ignore the effects of collecting payments in whole cents. The last payment may need adjusting for the rounding, so the final payment can differ and the balance hits $0.00. Monthly savings equal oldPayment − newPayment.
• Break-even months: Break-even divides the cash you pay at closing by Monthly Payment Change (F_upfront ÷ S), rounded half-up to 0.1 months. Cash at closing is Total Closing Costs less Closing Costs Rolled Into Loan. This holds when S > 0 and the payback comes before either loan's last payment. Rolled-in costs are already inside the new payment, which is why S is smaller, so they are not counted again. Otherwise break-even is the first whole month in which the payments you stop making, less the new payments and the cash paid at closing, reach $0.00. If that never happens, there is none.
• Net savings and interest: Both loans are compared until the later one is paid off. A loan that has ended counts as $0.00 afterward. Net savings equal interest on the current loan less interest on the new loan less total closing costs. A cash-out is borrowed money. You receive it once and repay it in the new payments, so it is not a saving, but the interest on it is a cost. The same-term line in the summary compares the new loan over your current loan's remaining months instead.
• Mortgage insurance and LTV: The calculator has no mortgage insurance input. Under Fannie Mae Selling Guide B7-1-01, unless the lender provides another charter-compliant form of credit enhancement, it must obtain primary mortgage insurance on a conventional first mortgage over 80% LTV. This applies when Fannie Mae buys or securitizes the loan. A new loan above 80% LTV can have a higher real payment than shown. The CFPB's guide to PMI removal says that after a refinance the "original value" is the appraised value at the time you refinanced.

These figures are estimates for learning and planning, not financial, tax, legal or investment advice. Terms of use.

What to check on your Loan Estimate before you lock

Match your remaining term before defaulting to 30 years. With 300 months left on $250,000.00 at 7%, a 25-year loan at 6% adds $111.87 a month over a 30-year reset. In return, it saves $46,856.11 in interest; compare terms in the mortgage term comparison calculator.

Compare page 2 of at least 3 Loan Estimates. Under 12 CFR 1026.37(h)(2), the Cash to Close table lists Total Closing Costs, Total Payoffs, and Closing Costs Financed. Cutting costs by $500.00 trims 1.9 months off break-even on a $268.07 saving. Itemize every fee in the closing costs calculator.

Check your current note for a prepayment penalty before paying off the loan. In its prepayment penalty guide, the CFPB notes that a prepayment fee usually applies only if you refinance "within a specific number of years (usually three or five years)." Even a 1% fee on $250,000.00 adds $2,500.00; test early payoff options in the mortgage payoff calculator.

Know whether you can cancel after signing. On a refinance of your principal dwelling, the right to cancel runs until midnight of the 3rd business day. The clock starts after you sign, receive the Truth in Lending disclosure, and receive two copies of the notice. Saturdays count, but Sundays and legal public holidays do not. A refinancing by the same creditor of a loan already secured by your principal dwelling is exempt except for new money. A vacation home is not a principal dwelling. Ask your lender which applies.

Questions on mortgage refinancing